01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
American Tower (AMT) closed 2015 as one of the largest global REITs, with total operating revenues of $4.77 billiona (up 16% year over year) and Adjusted EBITDA of $3.07 billion (up 16%).
Growth was driven largely by two transformative transactions: the $5.07 billionb Verizon Transaction (11,449 U.S. sites, closed March 2015) and the acquisitions of 4,716 Airtel sites in Nigeria and 5,483 TIM sites in Brazil. Property operations represent 98% of revenue, and the company reports that over $30 billion of non-cancellable tenant lease revenue is expected over future periods, supporting the recurring, low-volatility profile of the business. Net income attributable to common stockholders fell to $595 million from $801 million, reflecting higher depreciation, amortization and accretion ($1.29 billion, up 28%), a one-time $93 million cash tax charge tied to the MIPT REIT election, and larger interest expense and foreign currency losses.
Balance sheet and funding activity expanded significantly. Total debt reached $17.2 billionc, and the company raised about $3.78 billion of preferred and common equity in March 2015 to help fund Verizon, along with additional senior notes and securitizations.
Foreign currency headwinds were substantial: about 32% of revenue is denominated in non-U.S. currencies, and stronger USD weighed on reported growth in Latin America, EMEA and Asia, with a $1.08 billiond negative translation adjustment hitting other comprehensive loss. Management reports AFFO of $2.15 billion (up 18%) and maintains investment-grade credit ratings with $1.9 billion of liquidity at year-end, though leverage and the Viom acquisition in India (expected to close in 2016 for roughly $1.2 billion) remain key items to monitor.
02—Key points
Key Highlights
- Total operating revenues rose 16% to $4.77 billion in 2015, with property revenue up 17% to $4.68 billion; U.S. property revenue grew 20%, driven by the Verizon Transaction.
- Adjusted EBITDA increased 16% to $3.07 billion and AFFO rose 18% to $2.15 billion, indicating strong operating growth on a per-share and cash basis.
- Net income attributable to common stockholders declined to $595 million ($1.41 diluted EPS) from $801 million ($2.00) in 2014, mainly due to higher depreciation, interest expense, a $93 million one-time MIPT tax charge and unrealized FX losses.
- Portfolio expanded to 100,615 communications sites, including 11,449 Verizon sites in the U.S., 4,716 Airtel sites in Nigeria and 5,483 TIM sites in Brazil; the company added 25,368 sites in 2015.
- Over $30 billion of non-cancellable tenant lease revenue expected over future periods, with four tenants (AT&T, Verizon Wireless, Sprint, T-Mobile) representing 63% of revenue and historical churn of about 1% to 2%.
- Total debt of $17.2 billion and total liquidity of $1.9 billion at year-end; the company repaid the 2013 Credit Facility post year-end with a $1.25 billion January 2016 notes offering and reports compliance with all financial covenants.
- Pending Viom Networks acquisition (51% stake, ~76 billion INR or ~$1.2 billion) expected to close in the first half of 2016, which would add over 42,000 Indian towers and 200 indoor DAS networks.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $4.77B$4.10B | +16.4% |
| SG&A Expenses | $497.80M$446.54M | +11.5% |
| Operating Expenses | $3.16B$2.61B | +20.9% |
| Operating Income | $1.61B$1.49B | +8.5% |
| Net Income | $685.10M$824.91M | −16.9% |
| EPS (Basic) | $1.42$2.02 | −29.7% |
| EPS (Diluted) | $1.41$2.00 | −29.5% |
| Shares Outstanding (Basic) | 418.91M395.96M | +5.8% |
| Shares Outstanding (Diluted) | 423.01M400.09M | +5.7% |
05—Questions
Frequently Asked Questions
What drove the large increase in revenue and what portion is recurring?
Revenue growth of 16% was driven primarily by the Verizon Transaction (about 11% growth in U.S. property revenue), the Airtel and TIM acquisitions, and 2015 legacy site growth from new tenant leases. Nearly all property revenue is recurring because most tenant leases are non-cancellable with an initial 10-year term and built-in escalators (about 3% in the U.S., CPI-linked internationally).
Why did net income to common shareholders fall even though operating income grew?
Operating income grew 8.5% to $1.61 billion, but net income fell because of a 35% increase in depreciation, amortization and accretion, higher interest expense of $596 million, a $80 million loss on debt retirement, $135 million of other expense (mostly foreign currency losses), a $93 million one-time cash tax charge from the MIPT REIT election, and $90 million of preferred dividends.
How exposed is American Tower to foreign currency and international risk?
About 32% of 2015 revenue and 36% of operating expenses were denominated in foreign currencies. The company historically has not hedged most non-U.S. dollar operations, and a 10% adverse move in unsettled intercompany balances would produce about $72 million of unrealized losses. Currency weakness significantly reduced reported growth in Latin America and EMEA.
Is the company's leverage and debt profile manageable, and what covenants apply?
Total debt was $17.2 billion. The company was in compliance with its credit facility covenants, with a total leverage ratio requirement of 7.0x for 2015 stepping down to 6.0x thereafter, and reported about $5.3 billion of additional debt capacity under the total leverage covenant at year-end 2015. Securitized debt (2013 and 2015 securitizations) has cash-trap DSCR tests that could restrict cash distributions to the parent if breached.
Does the REIT structure and dividend policy support continued distributions?
As a REIT, AMT must distribute at least 90% of REIT taxable income. Common distributions declared in 2015 totaled $1.81 per share (up from $1.40), with the quarterly dividend raised to $0.49 in December 2015. Management expects to continue distributing substantially all REIT taxable income, although preferred stock dividend requirements and TRS-related limitations on income repatriation from international operations could constrain flexibility.
06—Continue